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What Rising Interest Rates Mean for You

January 26, 2017 08:15 AM

In December 2016, the Federal Reserve raised its benchmark interest rate, and there is reason to believe the rate will increase again in the near future. So how does this affect you? That rate determines the interest rate for your loans, including credit cards and student loans. This means the interest rate on many types of consumer loans will be increasing, whether it’s a loan you currently hold with a variable interest rate, or a new loan you plan to apply for. The impact may not be huge overall, but this is a good time to be thinking about your credit accounts.

Look at Interest Rates

If you currently have a credit card or consumer loan such as a student loan, take a look at your current interest rate. Is it fixed or variable? If it’s variable, this means you will likely see an increase in the rate. If you have the ability to make the switch to a fixed rate before rates increase again, you might want to consider it. However, variable rates are often lower than fixed, so you will need to weigh your options.

Pay Attention to Your Credit Report

In general, the higher your credit score, the lower your interest rate on a loan. So building good credit can help you save money over the life of your loan.

Refinance Your Student Loans

If you have entered grace or repayment on your student loans, you may be eligible to consolidate and refinance them into one account. This is one of the ways you may be able to secure a fixed rate on your loans (refinance loans may be fixed or variable). The federal government offers a Direct Consolidation Loan for federal student loans; to refinance private student loans, you will need to look at other lenders, like Student Choice. Keep in mind that by consolidating or refinancing your federal student loans, you may lose certain benefits such as income-based repayment, unemployment deferment, loan forgiveness programs, and a grace period.